Poland's KGHM says committed to Chile for long-term

Barbara Lewis

3 Min Read

SANTIAGO (Reuters) - Poland’s state-run KGHM KGH.WA, one of the world’s biggest copper producers, will stay in Chile for the long term, and is assessing its Canadian assets, its CEO said in an interview.

The company invested overseas for the first time in 2011, buying Chilean and Canadian copper deposits through its purchase of Quadra FNX, for around $2 billion. It was the largest ever foreign acquisition by a Polish company.

A plunge in copper prices CMCU3 in 2015 and early 2016 drove KGHM to a record loss last year, much of it linked to its Chilean copper mine Sierra Gorda.

“We want to be here. Our engagement in Chile is long term,” CEO Radoslaw Domagalski-Labedzki told Reuters in an interview on the sidelines of the CRU World Copper Conference in Santiago. “Now we see real progress.”

KGHM’s Canadian assets include projects in Ajax, British Columbia, and Victoria, Ontario.

Domagalski-Labedzki said that now the copper market has recovered, all options were open as KGHM continued evaluating its international assets.

The company is still waiting for an environment permit for Ajax, which has faced protests.

“I really hope in 2017 we can finally get the permit, then we can see what’s the condition of the market. It’s a matter of economics,” he said.

He was more enthusiastic about the Victoria project.

“It’s a very attractive asset. It’s possible to explore both copper and nickel and this is a deep mine so we have a lot of expertise,” he said.

At Sierra Gorda in Chile, the company announced in March it had suspended a second phase of development.

Domagalski-Labedzki said his focus was on optimizing the first phase and increasing daily processing capacity to 140,000 tonnes of ore from 110,000 tonnes per day now. He said the timetable depended on further analysis.

The company has yet to decide on a dividend, which he said was a matter for the board in May.

“KGHM is a dividend company and we would like to continue our dividend policy, so I hope it’s going to be possible, but we need to analyze very carefully because we had a very tough time in 2016,” he said.

That the company survived was in part because of its original Polish assets, which Domagalski-Labedzki said were a steady anchor, with stable annual production of refined copper products of 420,000-425,000 tonnes for “the years to come”.

“We survived because we had our Polish assets, but in the long perspective, we see the chance to get a payback from Sierra Gorda as well,” he said.